Organisations representing the mortgage industry now appear to be so rife, that they are threatening to outnumber the members that they represent. Okay, so this is somewhat of an exaggeration. However, it is fair to question whether diversification brings greater choice or whether fragmentation means the collective voice is diluted.
Why do we need representation?
As an industry we have a number of differing layers of representation from the true trade bodies to membership organisations, and all are there to serve us in different ways. Although, technically, there is no strict distinction between trade bodies and associations, within our industry we tend to define a trade body as one which deals with legislative and industry matters of a professional nature and an association as more representative of its membership on a day-to-day transactional level.
Throughout history, trade bodies and member organisations have been successful in improving industry reputation, standards and the creation of collective buying power. They serve a number of functions, each differing in priorities and range of services they offer. But the underlying theme is that they are there to serve the needs of their members and ensure clients are taken care of in a way that further promotes the services being offered.
Key attributes
There are no hard and fast rules on what makes a good trade body/association but the Department of Trade and Industry’s (DTI) Best Practice Guide for the Model Trade Association, first published in 1996, is a good template. It sets out the key characteristics that a modern best practice trade association should display and the nature of the services it should provide. I have selected from within that publication what I believe are important points within our industry:
Effective – professional and ethical in its approach.
Legitimate – represents a discrete commercial sector and seeks to cover all products, services and processes.
Progressive – promotes co-operation within the sector, and between the sector, its customers and suppliers.
Forms appropriate links with other representative bodies, to ensure that services are supplied to its members with the minimum of duplication, and in the most effective manner.
Services – works proactively to improve the members’/sector’s profitability and competitiveness and effectively to represent the members’/sector’s interests at all levels of the legislative and regulatory process.
Industry failings
The mortgage industry can be considered to be stratified and our representative bodies equally so. However, this means there are issues that can get lost in the cracks and some important issues, such as Home Information Packs (HIPs) for example, can be steamrollered through because we are not perceived as a single industry with a single, collective voice.
One of the main duties of any trade association is to represent the interests of its members. However, the duties of a trade body lie deeper than the promotion of simply members’ interests. There are also the interests of members’ clients to be mindful of and trade bodies must maintain standards. Certain trade bodies actually have a quasi-regulatory role such as Safe Home Income Plans (SHIP), but historically, within the financial services arena, such self-regulation has always proved short-lived. Consider the demise of the General Insurance Standards Council (GISC) in the general insurance market.
That said, I wholly support having, and enforcing, professional standards that are unique to each sector. Furthermore, a strong trade body can help support longer-term regulation by adopting best practice prior to it becoming mandatory. Common sense dictates that such an approach will give greater bargaining power in ongoing conversations with the likes of the Financial Services Authority (FSA). A good example of this is the Council of Mortgage Lenders (CML) working with the Association of British Insurers (ABI) on introducing minimum standards for the mortgage payment protection (MPPI) industry. SHIP is also following suit with its drive for compulsory qualifications for equity release advisers.
Defining a good trade body
A successful trade body holds the interests of its members at its core. However, it must also represent the industry by standing up and demanding better from their members to protect their reputation, ensure better products and services are provided, and, in the long-run, create an environment in which business volumes can grow.
Associations must also be flexible; as client members expand into other business areas so must they move with the client in order to better represent their interests.
Trade bodies in the mortgage and payment protection insurance (PPI) markets are fortunate to represent a vibrant and ever-changing industry that, at its best, delivers huge benefits to its clients. It is imperative they fight for best practice in terms of the conduct of business, not only to protect the needs of clients and the industry’s reputation, but also to ensure practitioners have the best environment in which to do business and grow into the future.
However, if these concerns and desires are not heard at the highest level they will count for absolutely nothing, and what worth has a market that is not prepared to give voice and demand the best for both its practitioners and clients?
Too many cooks?
I personally believe there is a real danger of too many organisations claiming to represent the interests of members. My personal background is in the intermediary and packager market, and the latter is most definitely over-supplied.
Within the last few days we have had the announcement of a new trade body to support secured loan providers. The Association of Finance Brokers (AFB) will become part of the Association of Independent Financial Advisers (AIFA) and will be a sister body to the Association of Mortgage Intermediaries (AMI). This announcement comes just two months after AMI and the Corporation of Finance Brokers (CFB) announcing their plans to form a joint organisation.
I am a member of AMI and therefore support the philosophy of specialist groups representing specific sectors. But, as already mentioned, I can see detrimental effects due to the dilution of collective voice. A further problem is that we must not lose sight of the fact that most mortgage brokers offer a diverse portfolio of products including prime and impaired lending, through mainstream lenders and the packager market, secured and unsecured lending, general insurance as well as PPI. With bodies representing all of these groups a broker could be paying out thousands of pounds a year in membership fees.
Within the packager market, I am not unknown for referring to the proliferation of trade associations as replicating a well-known Monty Python sketch from the Life of Brian. Where they have the Judean People’s Front, the People’s Front of Judea or the Judean Popular People’s Front, we have the Professional Mortgage Packagers Alliance (PMPA), Regulatory Alliance of Mortgage Packagers (RAMP), Association of Mortgage Packagers and Distributors (AMPD), United Packagers Association (UPA) and Freedom.
When I helped set up the PMPA in July 2000, there were no such representative bodies and there certainly appeared to be a lack of cohesion. PMPA now has 15 members and a total global mortgage distribution approaching £8 billion. As already mentioned, the key to success of any association is its ability to work closely with its fellow trade associations which is why the PMPA meets regularly with RAMP, the other major packager association. Like the PMPA, RAMP has a common philosophy and wants to achieve best practice in a regulated environment and also work in partnership with lenders particularly in the non-standard market, creating added value to the entire process.
Once again I don’t want to be critical of any association but I have to question whether some of the smaller associations can add real value and bring collective force to bear. My personal view is that many members would probably be better represented as sub-divisions of a major association or trade body rather than trying to go it alone. Not only does this give you more clout but it also saves in duplication of membership costs.
